Linked between India's city of Madurai and Sri Lanka's Anuradhapura, the project aims to supply up to 1000 megawatts of power to Sri Lanka, possibly via an undersea cable spanning 150 kilometres.
"The tentative costs of the project is between 430 million dollars to supply 1000 megawatts of power along a high voltage transmission link and 340 million dollars to supply 500 megawatts of power," Sri Lanka's Media Minister, Anurapriyadharshana Yapa told reporters here.
Mooted in the 1970s, the concept to sell power to Sri Lanka was revived following a recent study by Power Grid Corporation of India.
Once approved by both governments, construction is expected to take between 36 to 40 months, according to Power Grid Corp.'s estimates.
"The rationale behind this bilateral power agreement, is that it gives Sri Lanka a source of alternative stable power supply," Yapa, who is also the government's chief spokesman said during the post-cabinet press briefing.
Both sides have set up a high powered steering committee to drive the project, while the United States Agency for International Development or USAID, has agreed to give Sri Lanka technical assistance to carry out the feasibility study, Yapa added.
Sri Lanka's electricity demand grows by around 10 percent annually, but the installed capacity for generation has not kept pace.The Central Bank says around 200 megawatts of electricity needs to be added to the grid annually and warns the country may face a power crisis since there are no major power generation projects to come on board in 2007.